De Simone v. VSL Pharm., Inc.

• Decision Date: 07 June 2022
• Docket Number: 20-1846, No. 20-1869
• Citation: 36 F.4th 518
• Parties: Claudio DE SIMONE; ExeGi Pharma, LLC, Plaintiffs – Appellees, v. VSL PHARMACEUTICALS, INC.; Alfasigma USA, Inc., a Delaware corporation, Defendants – Appellants, and Leadiant Biosciences, Inc., formerly known as Sigma-Tau Pharmaceuticals, Inc, Defendant. Claudio De Simone; ExeGi Pharma, LLC, Plaintiffs - Appellees, v. Alfasigma USA, Inc., a Delaware corporation, Defendant – Appellant, and VSL Pharmaceuticals, Inc.; Leadiant Biosciences, Inc., formerly known as Sigma-Tau Pharmaceuticals, Inc., Defendants.
• Court: U.S. Court of Appeals — Fourth Circuit

36 F.4th 518

Claudio DE SIMONE; ExeGi Pharma, LLC, Plaintiffs – Appellees,

v.VSL PHARMACEUTICALS, INC.; Alfasigma USA, Inc., a Delaware corporation, Defendants – Appellants,andLeadiant Biosciences, Inc., formerly known as Sigma-Tau Pharmaceuticals, Inc, Defendant.

Claudio De Simone; ExeGi Pharma, LLC, Plaintiffs - Appellees,

v.Alfasigma USA, Inc., a Delaware corporation, Defendant – Appellant,andVSL Pharmaceuticals, Inc.; Leadiant Biosciences, Inc., formerly known as Sigma-Tau Pharmaceuticals, Inc., Defendants.

No. 20-1846

No. 20-1869

United States Court of Appeals, Fourth Circuit.

Argued: January 27, 2022

Decided: June 7, 2022

ARGUED: Robert Scott Brennen, MILES & STOCKBRIDGE P.C., Baltimore, Maryland; Turner Anderson Broughton, WILLIAMS MULLEN, Richmond, Virginia, for Appellants. Jeremy Wyeth Schulman, SCHULMAN BHATTACHARYA, LLC, North Bethesda, Maryland, for Appellee. ON BRIEF: Brian L. Schwalb, Calvin R. Nelson, Washington, D.C., Mitchell Y. Mirviss, Elizabeth C. Rinehart, VENABLE LLP, Baltimore, Maryland, for Appellant VSL Pharmaceuticals, Inc. Erinn M. Maguire, MILES & STOCKBRIDGE P.C., Baltimore, Maryland, for Appellant Alfasigma USA, Inc. Jeffrey S. Gavenman, SCHULMAN BHATTACHARYA, LLC, Bethesda, Maryland, for Appellees.

Before NIEMEYER, DIAZ, and QUATTLEBAUM, Circuit Judges.

Affirmed by published opinion. Judge Diaz wrote the opinion, in which Judge Niemeyer and Judge Quattlebaum joined.

DIAZ, Circuit Judge:

VSL Pharmaceuticals, Inc. and Alfasigma USA, Inc. appeal the district court's order finding them in contempt of the court's permanent injunction. The injunction prohibited VSL and Alfasigma from suggesting in promotional materials that their probiotic contained the same formulation as one marketed by Claudio De Simone and ExeGi Pharma, LLC.

VSL and Alfasigma argue (1) their statements weren't contemptuous, (2) their statements didn't harm De Simone or ExeGi, (3) the district court improperly awarded De Simone and ExeGi attorneys' fees, and (4) VSL and Alfasigma shouldn't be jointly liable for the fee award. We affirm.

I.

Claudio De Simone, an Italian professor and inventor, helped develop an eight-strain probiotic, which he patented in 1998. De Simone's probiotic helps treat conditions such as irritable bowel

syndrome and ulcerative colitis. He licensed the probiotic's formulation to VSL, which partnered with Leadiant Biosciences, Inc., to market it under the name VSL#3. Leadiant later assigned its rights under the contract to Alfasigma.

In 2015, De Simone cut ties with VSL, Leadiant, and Alfasigma. He began licensing his formulation to ExeGi, which marketed it under the name Visbiome. Meanwhile, VSL developed a new probiotic in Italy and began selling it under the name VSL#3.

In May 2015, De Simone and ExeGi sued VSL, Leadiant, and Alfasigma in the District of Maryland. The amended complaint alleged that (1) Alfasigma and Leadiant violated the Lanham Act by falsely advertising the new VSL#3 as clinically equivalent to its prior version and (2) VSL breached its license agreement with De Simone. A jury found Leadiant and Alfasigma liable for false advertising, awarding ExeGi $15 million, and VSL liable for violating the agreement, awarding De Simone $967,435.

Based on that verdict, the district court issued a permanent injunction, which enjoined Alfasigma and Leadiant from:

(1) stating or suggesting in VSL#3 promotional materials directed at or readily accessible to United States consumers that the present version of VSL#3 produced in Italy ("Italian VSL#3") continues to contain the same formulation found in the versions of VSL#3 produced before January 31, 2016 ("the De Simone Formulation"), including but not limited to making statements that VSL#3 contains the "original proprietary blend" or the "same mix in the same proportions" as earlier version[s] of VSL#3; and (2) citing to or referring to any clinical studies performed on the De Simone Formulation or earlier versions of VSL#3 as relevant or applicable to Italian VSL#3.

J.A. 451.

Less than four months after the district court issued the injunction, ExeGi moved for a civil contempt order against VSL and Alfasigma. ExeGi identified four violations of the injunction, three of which are relevant here¹ —(1) a letter Alfasigma sent to healthcare providers (the Healthcare Providers Letter), (2) comments on Facebook (the Facebook Commentary), and (3) an Actial Farmaceutica S.r.l.² press release (the Actial Press Release).

A.

The Healthcare Providers Letter was on Alfasigma's website before the court issued the permanent injunction. The Letter says:

Evidence introduced at trial [in the District of Maryland] ... showed that the current Italian-made VSL#3® contains bacteria that is equivalent to the [original] VSL#3® ... Experts and Scientists who worked on VSL#3 when it was originally made in Italy in the 1990s and early 2000s confirmed that:

I. Italian-made VSL#3® contains the same 8 strains of bacteria as the [original] product ... ;

II. Italian-made VSL#3® is equivalent to the [original] product; and

III. Studies previously performed on the [original] product can be relied on to show the efficacy and safety of the Italian-made product.

J.A. 520 (emphasis omitted).

Once the court issued the injunction, Alfasigma removed links to the Healthcare Providers Letter from its website. But Alfasigma didn't remove the Letter itself. ExeGi later discovered that consumers could still access the Letter by searching "vsl3 litigation" on Google.³ It so informed Alfasigma, who then broke the link to the letter.

B.

Alfasigma also rendered VSL#3's Facebook page inaccessible once the injunction issued. When Alfasigma brought the page back online, its caption under the heading "Our Story" read: "VSL#3® is a high-potency probiotic medical food

that is clinically proven in the dietary management of IBS, ulcerative colitis

[,] and ileal pouch and must be used under medical supervision." J.A. 560. In response to consumers' questions, Alfasigma repeatedly responded:

VSL#3® was temporarily not available for sale while a packaging update was being made to comply with the court's final order. The court did not prohibit the sale of VSL#3®. VSL#3® was not recalled or discontinued, there are no safety or efficacy concerns[,] and the formula has not changed.

J.A. 561–68.

C.

ExeGi alleged that Actial's Press Release, which discussed separate litigation in Italy about who owned VSL#3's bacterial strains, unfairly compared VSL#3 and Visbiome. The Release quoted Luca Guarna, the CEO of VSL and Actial:

VSL#3® is available for purchase in the U.S. and many markets globally, and we remain committed to making the VSL#3® probiotic available to our dedicated customers and healthcare providers notwithstanding De Simone and ExeGi's aggressive efforts to sell their competing, generic probiotic product[.]

J.A. 523. At least a dozen media outlets—including the Citizen Tribune, the Manchester Times, and Yahoo Finance–circulated the Release.

D.

In the district court, VSL and Alfasigma argued that they had substantially complied with the injunction. They claimed that they took down the Healthcare Providers Letter and Facebook Commentary as soon as they learned about them. As for the Actial Press Release, they contended that their use of the term "generic" didn't violate the permanent injunction because De Simone and ExeGi hadn't patented Visbiome and ExeGi had once called Visbiome "generic." VSL and Alfasigma also said that none of the statements harmed ExeGi.

In its reply, ExeGi raised another alleged violation of the permanent injunction in Alfasigma's YouTube Materials. Between 2012 and 2017, VSL#3's account posted a series of YouTube videos promoting the probiotic. These videos had accompanying captions describing VSL#3, some of which were functionally identical to the description in the Facebook Commentary. Other captions boasted that VSL#3 had "more than a decade of patient support and use," calling it "one of the most studied and sought-after high-potency probiotic medical foods

." J.A. 664.

E.

The district court found that VSL and Alfasigma violated the permanent injunction. Starting with the Healthcare Providers Letter, the court saw no dispute that its contents violated the injunction. Instead, VSL and Alfasigma urged merely that the violation wasn't willful and that they tried to render the Letter inaccessible. But the court determined that willfulness wasn't an element of contempt. So even if the violation were inadvertent, said the court, Alfasigma was still in contempt.

In discussing the Facebook Commentary, the court found that VSL and Alfasigma "effectively conceded that the statements [to consumers] violated the Permanent Injunction." De Simone v. VSL Pharms., Inc. , No. 15-cv-1356, 2020 WL 4368103, at *4 (D. Md. July 30, 2020). The court also found "that [the commenters] clearly had a script from which they were working." Id. at *4. And as with the Healthcare Providers Letter, that Alfasigma took down the comments once De Simone and ExeGi complained about them was of no moment. Because there were a "number of different violations," some of which "persisted over an extended period of time," the court found that VSL and Alfasigma's efforts to comply with the injunction "were notably deficient." Id. at *6.

The court then addressed the YouTube Materials. It noted that the Materials contained similar statements about VSL#3—i.e., that it was "clinically proven" to alleviate certain gastrointestinal symptoms. Id. at *4. Although the court recognized that those statements may have been true when the videos were first posted (when VSL#3 used the De Simone Formulation), it still found they violated the permanent injunction.

Likewise, the district court found VSL's arguments about the Actial Press Release unconvincing. The court said that VSL hadn't shown that Luca Guarna used the term "generic" in a technical sense—i.e., referring to the lack of a patent—because the Release was "widely circulated to diverse media outlets." I...